motoring guide

Government withdraws fuel duty increase plans

To many, the government's approach to transport and their plans to literally drive the economy forward are slightly contradictory when you consider that they also plan to increase fuel duty.

While the government only recently signalled its desire to increase the speed limit in an attempt to get Britons to work quicker and drive the economy, it also set out plans to increase fuel duty by three pence a litre in January. This will mean it will cost ordinary Brits an extra £1.50 to fill an average car each time they head to the pumps.

It could be seen by many to be taking with one hand but then also trying to give back with the other, leading to an altogether confusing situation.

However, after calls from within the Conservative party to halt the planned duty and give help to "hard-working, vulnerable Britons", it appears that chancellor George Osborne has agreed and backed down on a rise.

MP Robert Halfon had urged the chancellor to back down on the plans and claimed that any cuts would show that the government was intent on cutting taxes for all and not just for millionaires contributing plenty to its coffers.

He tabled a motion urging action on the issue which was signed by around 110,000 people in an e-petition. The action was approved by ministers without going to vote although there were fears nothing would come of it as it wasn't binding.

Mr Halfon said in the debate: "Fuel duty is not just about economics, it's an issue of social justice and this is especially true in rural communities which are being destroyed by fuel prices.

"In Harlow, the cheapest unleaded petrol costs £1.33 per litre. Most Harlow motorists are therefore spending £1,700 a year just to fill their tanks. For most people, that is the equivalent of £2,200 of income before tax—a tenth of the average Harlow salary".

However, the u-turn took place recently when Mr Osborne revealed in his Autumn Statement that there would indeed be a freeze on fuel duty. He made the announcement in a difficult speech where he was forced to backtrack on a number of government targets and promises related to other areas of the economy.

He outlined the revised plans which would see the planned increase in January scrapped while he also reassured drivers that the planned five pence rise in August would only amount to three pence more then petrol currently costs. It is believed that this, along with previous cuts to fuel duty earlier in the year, will save drivers £144 when filling up the average family car by the end of next year.

When it comes to a number of areas of politics, it is often difficult to separate what is promised in Whitehall and what is actually felt by ordinary people at ground level, in this, case the forecourt.

Mr Osborne suggested that the levels of fuel duty would have been far higher were Labour still in charge because of the fuel-tax escalator. This is a mechanism by which fuel tax would consistently rise each year by one pence above inflation and has already been scrapped by the current government.

In addition, the government already cut fuel duty by one penny earlier this year so to an extent, it is clear that the coalition is attempting to build bridges with motorists who have seen prices triple in the space of two decades. Should you look to read between the lines and ignore the inclusion of some government rhetoric, there are a few issues that are raised as to what the coalition's true plans are.

While it may seem like an honorary thing for the government to withdraw these plans, the fact is that they were initially prepared to raise duty in the first place. Could it just be a case of this petition and internal pressure from MPs pressuring the government into acting?

Also, to what extent was the retraction of this planned increased used as a sweetener in a speech in which the chancellor made a series of quite embarrassing backtracks. It is perfectly plausible to think that the retraction could have been used to avoid the speech being entirely made up of bad news for the public in general.

That certainly appears to be the case to an extent when you think that Chloe Smith, economic secretary to the Treasury, claimed that there was nothing to be done at that point in time or indeed any time before the budget.

Ms Smith said: "The cost of fuel remains a very difficult issue and a concern to many families and businesses across the country", but added that this "is not the day to try to change taxes - that is for the Budget.

Continuing with the party politics, Ms Smith attacked Labour, for having "no plans whatever to support motorists". She used the fuel duty escalator as an example of this and claimed that none of their planned increases "subject to either oil price or pump price movements".

The Forum of Private Business (FPB) stated prior to the announcement that it was concerned at the effect a price rise would have on the already precarious state of small businesses' financial situations. It agreed with Mr Halfon's statement that high fuel prices harm the viability of growth and can curtail consumer spending.

FPB chief executive Phil Orford said: "Our members have seen a continued rise in the cost of business over the last year, and according to our latest survey, 92 per cent of SMEs saw an increase in transport costs.

"An additional fuel duty increase in the current climate simply can’t be justified.

"Not only would significant tax hikes damage small firms further, it’s highly likely growth would be affected with consumers having less money in their pocket to spend.

So whether it's political or economical, it seems that drivers have been given a slight boost with the announcement. Although with fuel prices rising rapidly over the past few decades, it could only be a stay of execution.

13 Dec 2011